Tether Limited, the company behind the popular stablecoin USDT, has announced a new investment strategy. It focuses on Bitcoin (BTC). The plan involves using a significant portion of its profits to regularly purchase Bitcoin. This is in order to strengthen and diversify its reserves.
More so, this move positions Tether as a major holder of Bitcoin, potentially rivalling companies like MicroStrategy.
With a market cap exceeding $82 billion, Tether has become a prominent player in the cryptocurrency market. The stablecoin USDT is widely used by traders and investors to navigate market volatility. In addition, it also facilitates fund transfers between crypto exchanges.
Leveraging Bitcoin’s stability as a long term store of value
Tether drives the adoption of this new investment approach, leveraging Bitcoin’s stability and considering it a long-term store of value.
As part of this plan, Tether intends to allocate around 15% of its net realized operating profits towards acquiring Bitcoin. This allocation is in addition to the existing $1.5 billion in Bitcoin reserves. This is documented in the company’s Q1 2023 Assurance report.
Furthermore, Tether’s goal is to enhance the resilience of its reserves and diversify its portfolio. It has a conservative and prudent investment strategy.
In addition, Tether has initiated a practice of allocating a portion of its net realised operating profits, up to 15%, to purchase Bitcoin regularly. The company ensures that its Bitcoin holdings will not surpass the Shareholder Capital Cushion, thus reinforcing and diversifying its reserves.
Further Implications and Tether’s strategic development
Tether’s commitment to the security of its BTC holdings is evident in its practice of taking possession of the private keys associated with its Bitcoin reserves. This approach ensures full control over these assets.
Furthermore, Tether’s credibility and trustworthiness are bolstered both among its users and the broader cryptocurrency community.
The implications of Tether’s new investment strategy extend beyond its own operations. Tether’s allocation of a significant portion of its profits to Bitcoin purchases sets it to become one of the largest holders of BTC in the industry. It will stand to rival MicroStrategy, a well-known advocate for Bitcoin.
This development underscores the growing prominence of Bitcoin as a mainstream asset and its increasing acceptance among major institutions.
Moreover, Tether’s move reflects a broader trend of stablecoin issuers exploring alternative investment avenues to strengthen their reserves. The conservative investment approach adopted by Tether demonstrates its commitment to maintaining a robust financial position. Meanwhile, it will capitalise on the potential long-term growth of Bitcoin.
Financial performance of Tether crossing expectations
Tether’s announcement comes on the heels of its impressive financial performance. It made a net profit of $1.48 billion reported in March 2023, bringing its total excess stablecoin reserves to $2.44 billion.
The stability and direction of the entire stablecoin market can be influenced by Tether’s actions and decisions. As the largest stablecoin globally, with a circulating supply surpassing $82.8 billion, Tether’s role carries significant weight.
With Tether’s increased focus on Bitcoin, the market can expect heightened demand and potential price appreciation for the leading cryptocurrency. This development may also contribute to broader adoption of Bitcoin as a reliable store of value, given Tether’s reputation and extensive user base.
Tether’s strategic move highlights the increasing convergence between stablecoins and major cryptocurrencies as the crypto market continues to evolve. The integration of stablecoins, such as USDT, with established digital assets like Bitcoin further reinforces the maturation and mainstream acceptance of the entire crypto ecosystem.
Tether’s decision to purchase Bitcoin at the $27,000 level, down from its peak of around $65,000 in November 2021, demonstrates a well-timed move.
Further, by taking advantage of the price correction and “buying the dip,” Tether strengthens its reserves. In addition, it also showcases its market understanding and ability to seize opportunities in the volatile crypto market.
Lastly, as Tether positions itself as one of the largest holders of Bitcoin alongside notable companies, it adds further credibility to the stablecoin market.